- What is LTV (and are 100% LTV mortgages possible?)
- A Video Guide To LTV
- So, 100% mortgages? – A message from an advisor
- LTV (Loan-To-Value) Table Guide
- No Deposit Mortgages (Alternatives for 100% Mortgages)
- First Steps To Getting A Mortgage
THERE HAVE BEEN CHANGES ON THIS TOPIC: – YOU MAY FIND THIS ARTICLE USEFUL
What is LTV (and are 100% LTV mortgages possible?)
When you’re looking to buy a property with a mortgage, you’ll be looking at what’s known as the LTV, or Loan-To-Value. It’s pretty much what it sounds like – the proportion of the total cost of the property that will be covered by your mortgage loan.
It’s important to note that when we talk about 100% LTV mortgages, we’re referring to one lender offering 100% of the purchase price without additional security against the loan. So, for lenders to be lending 100% of a property value, that would be taking a pretty big risk (and costing a lot,) so it’s no real surprise that these are seen as a thing of the past.
However, this does not include products branded as “no deposit”.
Below is a handy video guide to LTV and a table with a breakdown – we’ve included the figures for 100% for comparison.
Our partner advisors are up to date on all things mortgages and with access to the whole-of-market, they get a good insight into what products are currently available.
Here’s what they had to say:
Due to COVID-19 and uncertainty for lenders, almost all were looking for at least a 10% deposit for products where applicants have clean credit, unless it was a product like help-to-buy equity loans where a 5% deposit may have been viable. We’re now in a position where the government can guarantee a 5% deposit, (as of April 2021) and some lenders are offering 95% LTV mortgages outside of that. Schemes such as these are so important to help people access mortgage products and we’re thrilled that there are now more options for those who can’t get 10% deposits together.
(16th March 2021)
Loan-To-Value (LTV) Table
Here’s a small table to help you visualise what LTV you may be looking at. For this example, we’ve used a house valued at £100,000 as a model.
- LTV %’s can also be in 5% increments, but for this example, we’ve kept it simple as a visual tool.
No (or Low) Deposit Mortgages (Alternatives for 100% Mortgages)
Now here’s the thing, just because 100% LTV mortgages (one lender offering 100% of the purchase price without additional security against the loan) are not available, it does not necessarily mean that products branded as “no deposit” may not be.
- Government Mortgage Guarantee Scheme – In the March 2021 budget, a new mortgage help scheme was announced. With this new scheme, it is lenders that will be incentivised to offer the 95% mortgage products. For them, the security comes from the government guarantee on loans. Many high street names have already opted into the scheme, with more expected to join.
- Right-To-Buy Mortgages – Some lenders will allow applicants to use their right-to-buy discount as a deposit. This is, however, at the discretion of the lender and the relevant local authority.
- Guarantor Mortgages – Not as common this year, but this option would see a lender place a friend or relative’s savings in a savings account for a fixed amount of time as security against the mortgage. This again will vary between lenders and availability of these schemes is inconsistent in 2020.
- Gifted Deposits from Family and Friends – Sometimes borrowing funds from loved ones is an option; the caveat will be that lenders require a signed letter to say that the applicant will be under no obligation to pay this money back to the source of the deposit.
- Help-to-Buy Mortgages – A popular alternative, these can require as little as a 5% deposit. The scheme offers applicants an equity loan that lets them borrow for an interest-free deposit. Buyers are able to repay this equity loan at any time without any additional charges. If you don’t repay, when you sell, the government will take a stake from the property’s current value. This scheme is restricted to new-build properties with a value under £600,000. There are lots of rules for this type of mortgage so it may be worth speaking to an advisor.
First Steps To Getting A Mortgage
Once you’ve got an idea of where you stand, we’d always recommend speaking to an advisor – even if you don’t go ahead right now.
They’ll be able to give you an idea of a reasonable and doable timeline for your mortgage application.
When you’re matched for free through Mortgage Buddy, your initial scoping conversations and advice from your advisor are free and no obligation. This stage is to analyse where you are, and if there are any bad-credit elements to your application that need to be allowed time to minimise the impact on your credit profile.